The Indian Rupee sees a sharp fall against the US Dollar, settling near 90.85, despite the Reserve Bank of India keeping the Repo Rate at 5.25%. The RBI had already reduced the rate by 125 basis points in 2025, with the economic outlook supported by trade deals with the US and the EU.<\/p>\n
Governor Sanjay Malhotra announced that interest rates would remain low for an extended period. The bank predicts higher-than-expected GDP growth in the coming quarters, driven by these trade deals, with further projections due at the April meeting.<\/p>\n
Following trade agreement confirmations, the Indian Rupee initially performed well, buoyed by reduced US tariffs. However, FIIs became net sellers, with sales worth Rs. 2,150.51 crore on Thursday, offsetting previous stock purchases post-trade truce.<\/p>\n
Globally, the US Dollar Index drops slightly, amid improved prospects of a Federal Reserve rate cut, attributed to weak job data. JOLTS reported lower job openings than expected, and the private sector saw an underwhelming job creation in January.<\/p>\n
The USD\/INR recovers towards the 20-day EMA, with the RSI approaching neutral. Future strength depends on breaking the 20-EMA at 90.95, although downside risks remain if this is not achieved.<\/p>\n
Given the recent events, we see the Indian Rupee facing conflicting pressures, creating a complex trading environment. The landmark trade deal with the US, which saw tariffs on Indian goods drop to 18%, initially caused a surge in the Rupee earlier this week. However, the quick reversal of foreign fund flows, with FIIs selling Rs. 2,150.51 crore on Thursday after buying heavily on Tuesday, suggests that initial optimism may be waning.<\/p>\n
The Reserve Bank of India is maintaining a delicate balance by holding the repo rate at 5.25%, a decision that followed 125 basis points of cuts during 2025. Governor Malhotra\u2019s forward guidance hints at the possibility of further rate cuts, which would typically weigh on the Rupee in the long term. This dovish tilt comes despite an upgraded growth outlook, creating uncertainty about the central bank’s primary focus.<\/p>\n
Looking at historical patterns, we saw a similar surge in foreign investment and Rupee strength after the 2014 general election results, which led to a multi-year bull run. However, recent data from the end of 2025 showed FIIs had already invested over $22 billion into Indian equities, making the market susceptible to profit-taking. The recent outflow, though small, could signal the start of such a phase if global uncertainties increase.<\/p>\n
On the other side of the pair, the US Dollar is under significant pressure due to a weakening labor market. December’s JOLTS job openings fell to 6.542 million, far below the 7.2 million consensus, and this weak data has dramatically increased the chances of a Federal Reserve rate cut in March. The market is now pricing in a 22.7% probability of a cut, a sharp rise from just 9.4% two days ago.<\/p>\n
This slowdown is consistent with other recent US economic statistics, such as the Q4 2025 GDP growth which came in at a modest 1.9%, slightly below expectations. Furthermore, the latest inflation reading for January 2026 showed the Consumer Price Index (CPI) holding steady at 2.3%, giving the Fed ample room to ease policy without stoking price pressures. All attention now shifts to the delayed Nonfarm Payrolls report, which will be the key driver for the dollar in the coming days.<\/p>\n
For derivative traders, this heightened uncertainty in USD\/INR suggests that options strategies designed to profit from volatility are appropriate. Buying a straddle or a strangle ahead of the US payrolls data could be a viable strategy to capitalize on a large move in either direction. For those leaning bearish on the Rupee due to FII outflows, buying USD\/INR call options offers a low-cost way to position for a break above the key 90.95 level.<\/p>\n
We should also note the Rupee\u2019s specific weakness against the Australian Dollar. This indicates that some of the Rupee’s softness is independent of general US Dollar strength. Traders could consider looking at AUD\/INR call options to hedge against or speculate on further underperformance of the Indian currency against commodity-linked currencies.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Indian Rupee weakens to 90.85 against Dollar despite RBI rate hold; trade deals support GDP outlook.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41197","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41197","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41197"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41197\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16964"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}